States are preparing for a future where more residents are older, healthcare costs are higher, and demand for public services continues to grow.
As the US population continues to age, states are facing growing fiscal pressures that will require long-term planning and cross-agency coordination. A new report from The Pew Charitable Trusts highlights how demographic shifts are expected to affect state revenues, increase healthcare costs, and drive demand for a wide range of public services in the coming decades.
Adults age 65 and older now make up 18% of the US population, up from 12.4% in 2004, and that share is projected to exceed 20% by 2030. At the same time, the number of working-age adults and children is expected to decline, changing the balance of taxpayers and service recipients that state budgets rely on.
According to Pew, states should prepare for three primary fiscal impacts:
- Revenue changes: As more residents retire, taxable income and consumer spending generally decline. States that rely heavily on income and sales taxes may see slower revenue growth, particularly as more older adults qualify for age-related tax exemptions.
- Health expenditures: Older adults account for a disproportionate share of Medicaid expenditures and are more likely to require long-term services and supports. States also face growing costs related to retiree healthcare obligations and aging prison populations.
- Demand for state services: Transportation, affordable housing, caregiver support, healthcare, nutrition assistance, and aging-in-place services are expected to see increasing demand as the senior population grows.
To prepare, many states are conducting long-term fiscal analyses and needs assessments. Pew’s review of State Plans on Aging found that transportation, caregiver support, housing, healthcare, and in-home services were the most commonly identified priorities for older adults. The report also notes that workforce shortages and challenges connecting residents with available services remain significant barriers.
Maryland is among 14 states that have adopted a multisector plan for aging, integrating long-term planning across multiple state agencies. Rather than focusing solely on aging services, Maryland just codified an all-of-government, longevity-focused, multisector approach to better prepare for the state’s changing demographics and future service demands. The Maryland Department of Aging in partnership with state and local government, legislators and other partners who support older Marylanders, now turn to the next decade of implementation of recommendations in the state’s Longevity Ready Maryland Plan.
Proactive planning will continue to be essential as states adapt to an older population. By assessing demographic trends, forecasting fiscal impacts, and coordinating investments across agencies, states can better position themselves to maintain sustainable budgets while meeting the evolving needs of their residents.
